Beginner’s Guide To Dealing In Penny Shares

Dealing In Penny Shares

Trading penny shares can be a lucrative venture for people who comprehend how the industry works. However, most traders, more so the “newbies” fail to thrive in this industry since they lack the right skills to start them off.

If you are one of those “newbie” traders, this post is written for you. We have evaluated all the basic information you would want to know before you start trading.

What Are Penny Shares?

It is a stock priced under $5. In most cases, these shares are considered as speculative, illiquid, and risky. However, if you are a savvy trader, the penny shares could offer you a rare opening to turn a small investment to a great treasure.

What Are The Paybacks Of Trading Penny Stocks?

Low Share Price

As we noted above, penny shares cost less than five dollars. On that account, trading the shares could be a worthy starting point for investors who have limited starting capital to trade higher-priced shares.

Potential Of Generating High Returns

Since penny stocks are offered at low prices, you can buy as many shares as you want, and later sell them at a profit when their value rises. In fact, savvy traders claim that some shares’ price could double up within a short period.

Penny Stocks Are Readily Available For Newbies

Unlike the high-end shares, penny stocks are readily available to new traders who have imperfect trading skills and limited money to invest in expensive shares.

Risks of Penny Shares

While trading penny stocks seems like a profitable venture, you should be cautious of its risks before you start trading. For instance, you might find it hard to resell penny stocks from dying or bankrupt companies. Moreover, the value of the shares may at times depreciate further, thereby leading to losses.

How Can You Minimalize The Risks?

As can be seen, trading penny shares can be rewarding and at the same time uncertain. However, if you want to minimize the risk of losing your investment, you ought to take the expert vetted tips below into account.

Invest what you can manage to lose

Given the risky nature of this trade, we suggest that you risk an amount that you can afford to lose. Investing too much can frustrate you if the trade gets against your speculation. Furthermore, risking a high amount could place you at a risk of over-trading as a way to make up for the lost amount.

Get a mentor

If it is your first time to trade, we advocate that you get a seasoned trader to walk you through the industry. Experienced traders have developed tricks that could help you avoid costly trading mistakes.

Scrutinize the market before you invest

Frankly speaking, not all penny shares are worthy your investment. For that reason, you should scrutinize the companies whose shares you intend to buy, before taking a position. You can rely on your knowledge, or the scrutiny of reputable financial portals that provide adept opinions on penny shares.

The Bottom Line

Investing in penny shares can be a profitable or risky venture. If you wish to avoid the latter consequence, we propose that you spend what you can afford to lose, get an experienced trader to guide you, and analyze the market before you start trading.